Canada Border Services Agency is Juiced to Verify Tariff Classification Compliance of Juice Importers
The Canada Border Services Agency (CBSA) is targeting juice in its 2011 national priorities for post-release trade compliance verifications. This is the second year for this verification target because significant non-compliance was found with respect to the importers of the first sample of importers of juice. The United States recently targeted juice importers also and discovered significant non-compliance.
The CBSA will select a number of importers of juice who will receive letters of an upcoming verification. The focus of the verification will be tariff classification and tariff treatment (for example, if the importer claimed NAFTA treatment, the goods meet the rules of origin). The H.S. tariff classification code that the CBSA has indicated correlates with the juice verification priority is harmonized system heading 20.09. H.S. Tariff Code 20.09 covers:
"Fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter."
The following Chapter note is important: "for the purposes of heading 20.09, the expression 'juices' unfermented and not containing added spirit means juices of an alcoholic strength by volume (see Note 2 to Chapter 22) not exceeding 0.5% vol."
The questions that the CBSA ask include whether the H.S. tariff code used by the importer is correct. The CBSA will also look at whether the importer claimed the correct tariff treatment (which looks at origin of the juice). If General Preferential Tariff (GPT) treatment is claimed, do the imported goods meet the criteria or should Most-Favoured Nation (MFN) tariff treatment have been claimed? If NAFTA treatment is claimed, does the juice meet the rules of origin. In the case of juice, the goods might not be considered to be of U.S. origin if juice is manufactured in the United States from foreign fruit/vegetables.
In my estimate, one of the issues for juice manufacturers who claim preferential tariff treatment will be demonstrating the origin of the fruit/vegetables and other ingredients in the juice. If a manufacturer of juice buys produce from a fruit seller, the manufacturer may not have the information needed to prove origin of the fruit. Certain preferential tariff treatments may be difficult.
Another important issue with respect to the tariff classification of juice is the addition of ingredients other than the fruit and vegetables. The tariff classification may differ based on alcoholic content and whether the recipe is fermented. The tariff classification may be based on vitamin and supplement additives to the juice. The ingredient listing is important to the CBSA (and, therefore the formula for the juice must be provided). Often this information is not shared with the customs broker and the incorrect tariff classification is used.
Recently, new formulations of fruit juice based products are being sold on Canadian grocery store shelves. I particularly like the single serving fruit juice boxes and cans that advertise that a serving contains one daily fibre requirement (or two servings of fibre in every can) or that the juice has added calcium or other supplement that has specific health and wellness properties. I also enjoy the fermented flavoured teas (as does Lindsay Lohan). I think that the recent increase in popularity and options for such products is one of the reasons for this category of goods to be newly targeted this year by the CBSA.
If you are an importer of juice into Canada, this is a good time to review your tariff classification and tariff treatments. If you have not yet received a letter from the CBSA about an audit/verification, you may be entitled to make a voluntary disclosure should you find a mistake. If you are entitled to make a voluntary disclosure, you may save the amount that would be charged as penalties if the CBSA finds the mistakes during an audit/verification. In addition, if you make a voluntary disclosure of mistakes that result in an increase in customs duties payable, you save the interest from the date of the voluntary disclosure. In addition, based on my experience, the CBSA has a greater willingness to discuss reasonable payment arrangements when a person makes a voluntary disclosure and does not have the ability to pay the additional customs duties.
For more information, please contact Cyndee Todgham Cherniak, a Canadian customs lawyer, at 416-307-4168.